Suitable for: Anyone who earns income through shares
Tax Difficulty: Intermediate
Time to read: 1-2 minutes
Tax Focus: Income Tax Returns
Throughout a financial year, you may receive dividend income from companies that you own shares in, such as an ASX listed company. In this Help Centre article, we’ll introduce you to dividends and how they should be reported on the Airtax income tax return.
What are dividends?
If you own shares in a company, they may choose to pay you a share of their profits in return for your investment. This payment is called a dividend, and is income that needs to be reported on your income tax return.
When you are paid a dividend by a company, they will issue you with a dividend statement which provides you with all of the details needed to complete the necessary section on your income tax return.
What does it mean for your tax return?
Dividends are included in your tax return and are taxed at your marginal tax rate. If a dividend is paid in a tax year, then it should be included in your return in the tax year it is paid. For example, if the dividend payment date (you can find this on the statement) is 5 July 2019, it should be included in your 2019/2020 Australian tax return.
Where a dividend is franked, there will be a franking credit attached to the dividend which is a credit for the tax the company has already paid on the dividend. You will receive a credit for this amount in your tax return.
How do I account for dividends on my Airtax Income Tax Return?
Dividends paid to you are reported to the ATO and should be available through the ATO prefill. When you start your Airtax tax return, you will be connected to the ATO and this section will be prefilled for you with ATO data.
If you need to manually add any dividends, follow the below steps:
- Source the dividend statements received during the year.
- From the dividend statements received, it will outline the franked portion, unfranked portion and any franking credits. Manually enter these into Airtax.
NOTE: If you cannot find your dividend statements, you may be able to log into the shareholder portal. If you find some old correspondence received in respect of your shareholding, you should see generally in the top right hand corner your “SRN” - this is your shareholder reference number. Then, you can simply Google the “shareholder portal” of the company you have invested in. Once you are in this portal, you should be able to find the dividend statements in the portal.
I participate in the Dividend Reinvestment Plan (DRP), do I still need to include the dividends in my return?
Yes, even if you participate in the DRP you still include the dividends in your Australian tax return and pay tax on the dividends received.
For capital gains tax purposes, the cost base of the shares you receive will be the amount they were allocated to you through the DRP process - and this will be indicated on the dividend statement.
Make sure you keep a record of the number of shares allocated, and the price-per-share they are allocated at, as this will be relevant when you sell the shares in the future.
What you have learned:
- What dividends are, and how they need to be reported on the Airtax tax return
- What to do if you participate in a Dividend Reinvestment Plan